Lucky Cement’s subsidiary company is going to produce mobile phones in Pakistan for the world’s largest smartphone maker, Samsung, by December 2021.
According to a notification submitted to the Pakistan Stock Exchange (PSX) on Friday, Lucky Motor Corporation Limited (LMC) – a subsidiary of Lucky Cement Limited, which is currently engaged in the business of the manufacturing, assembly, marketing, distribution, and sales of Kia and Peugeot branded vehicles, parts, and accessories – has recently entered into an agreement with Samsung Gulf Electronics Co., FZE (‘Samsung’) to produce Samsung branded Mobile Devices in Pakistan.
The Minister for Energy, Hammad Azhar, took to Twitter to announce the development, saying, “I congratulate Lucky Group and Samsung on entering into a JV to manufacture smartphones in Pakistan. These positive developments are evidence of the success of the DIRBS system that eliminated the smuggling of phones. And then followed up by Mobile Manufacturing policy last year”.
I congratulate Lucky Group and Samsung on entering into a JV to manufacture smart phones in Pakistan.
These positive developments are evidence of the success of DIRBS system that eliminated smuggling of phones. And then followed up by Mobile Manufacturing policy last year. https://t.co/UCEsF0dKVq
— Hammad Azhar (@Hammad_Azhar) July 16, 2021
In pursuance of this transaction, LMC has also initiated the process of seeking necessary regulatory approvals to carry on the business, and has also filed an application with the Pakistan Telecommunication Authority (PTA) to secure the license as part of this endeavour, the notification said.
The production facility for the production of Samsung Mobile Devices will be located at LMC’s existing plant facility that produces vehicles at the Bin Qasim Industrial Park, Special Economic Zone, Port Qasim, Karachi.
The production facility is anticipated to be completed by the end of December 2021.
According to a report by the brokerage house Topline Securities, the investment size is rumored to be around $100 million (Rs. 16.4 billion), as a result of which LMC is expected to generate average earnings (EBITDA) if Rs. 15 billion over the next two years.
The report also said that the production facility will yield an annual revenue of $300 million to $600 million, with the project yielding net profits of Rs. 1 billion to Rs. 1.5 billion in its early years.
Swedish asset managing company specializing in frontier markets, Tundra Fonder’s Chief Investment Officer Mattias Martinsson said on Friday “Despite being the 5th largest country in the world It has taken the new government a lot of time and efforts to convince foreign manufacturers. Now it feels Pakistan has crossed that hurdle. Expecting more of these headlines going forward”.
Despite being the 5th largest country in the world It has taken the new government a lot of time and efforts to convince foreign manufacturers. Now it feels #Pakistan has crossed that hurdle. Expecting more of these headlines going forward.#EmergingMarkets #FrontierMarkets https://t.co/V7nHjUi2Al
— Mattias Martinsson (@Tundra_CIO) July 16, 2021
He said, “The main benefit of local production is not the FX it saves. Instead, it is the technical knowledge transfer and the improvement of the human capital base (NPV of future salaries increases with higher value-added employment).”
The company’s Specialist Asset Manager said, “With a mobile subscriber base of approximately 185 million people, Pakistan imported around 35 million mobile phones in 2020 (up from 28 million in 2019, and 17 million in 2018). Following Xiaomi, [now] Samsung is starting local production. More manufacturers will follow”.